Environmental Legislation Advances in The Creation of Opportunities to Pay for Environmental Conservation, Recovery and Improvement

The Forest Code (Law No. 12,651/2012) has instituted the Support and Incentive Program for the Preservation and Recovery of the Environment, through which several categories and lines of action related to the promotion of environmental protection were defined, including payment for environmental services for conservation and improvement of ecosystems activities.

Although there are some voluntary initiatives carried out by companies and civil society, the Brazilian legislation was still pending on the creation of a legal instrument to regulate payment for environmental services, until January 14, 2021, when Law No. 14,119/2021 came into effect, establishing the National Policy for Payment for Environmental Services (“PNPSA”).

But in practice, what may be defined as environmental services and the payment linked to them?

Payment for environmental services is a transaction of a voluntary nature, through which a payer of environmental services transfers financial resources or other forms of remuneration to a provider of such services, under arranged conditions, in compliance with the relevant legal and regulatory provisions. The payer can be a public authority, civil society organization or private agent, individual or legal entity, national or international. The provider may be an individual or legal entity, of public or private law, or family or community group.

The same Policy defines environmental services as being the individual or collective activities that promote the maintenance, recovery or the improvement of ecosystem services, through the services of provision (e.g. water, food), support (e.g. pollination, pest control, soil renewal, biodiversity maintenance and genetic heritage), regulation (e.g. climate control, soil stability), and culture (e.g. tourism).

The Federal Program for Payment for Environmental Services was also created by the recent Policy, aiming at supporting the payment for these services by the Federal government, focusing on actions of maintenance, recovery or improvement of vegetation coverage in priority areas of conservation to avoid habitat fragmentation, formation of biodiversity corridors and water resources conservation.

The payment can be made in several ways: (i) direct (monetary or not); (ii) provision of social improvements to rural and urban communities; (iii) compensation linked to a certificate of reduction of emissions from deforestation and degradation; (iv) lending; (v) green bonds; (vi) and Environmental Reserve Quota established by the Forest Code.

The National Policy should promote the following measures:

1. Conservation of vegetation remnants in urban and semi-urban areas, important for the maintenance and the improvement of air quality, water resources, well-being of the population and for the formation of ecological corridors;
2. The conservation and improvement of water quantity and quality, especially in watersheds with critical vegetation coverage or in areas subject to disaster risk;
3. The recovery and reconstitution of native vegetation coverage in degraded areas, through the planting of native species or through an agroforestry system;
4. The sustainable management of agricultural, agroforestry and agro-forest-cattle systems that contribute to carbon capture and retention, as well as soil, water and biodiversity conservation;
5. The maintenance of areas covered by native vegetation that could potentially be cleared by authorized parties;
6. The conservation of landscapes of great scenic beauty; and
7. The conservation and recovery of native vegetation, wildlife and the natural environment in rural areas.

The following private properties are eligible to provide environmental services, provided that they are:

1. located in a rural area registered in the Rural Environmental Registry (“CAR”);
2. located in an urban area that is in accordance with the city’s master plan;
3. constituted as Private Natural Heritage Reserves (“RPPNs”), as well as buffer zones and ecological corridors that are covered by native vegetation.

Permanent preservation areas, legal reserves and others under administrative limitation will be eligible for payment for environmental services,  using public resources, in accordance with regulation, with preference for those located in watersheds considered critical for public water supply, or in priority areas for conservation of biological diversity in the process of desertification or advanced fragmentation.

However, the National Policy for Payment for Environmental Services also establishes certain restrictions, such as on the application of public funds for payment for environmental services for individuals or legal entities that are not in compliance with certain types of conduct adjustment terms or commitment terms signed with the relevant agencies, as well as for areas embargoed by the environmental agencies.

The payment will depend on the verification and proof of actions to improve, maintain or recover the environment, in accordance with future regulation.

The National Policy for Payment for Environmental Services also changed the Public Registries Law (Law No. 6,015/1973) by also allowing the registration of property under contract for the payment for environmental services, when it stipulates obligations of a real nature and that must accompany the property, including if it is comes to be transferred to a third party.  Among these obligations, it calls attention to the maintenance of vegetation and landscape conservation, aspects that previously demanded the effort of easements and that now have one more mechanism to ensure its perpetuity.

Demarest’s Environmental Law and Real Estate teams are available to provide further information or clarification.